Shipping Rates Plunge as Owners Fret About Trade War Impact

Date: Sep 13, 2018

When U.S. President Donald Trump fired the first salvos in his trade war with China, the market for hauling bulk commodities that power the Asian country’s economy responded with a surprising surge. Now shipowners are losing their swagger.

Rates to haul iron ore and coal on 1,000-foot Capesize ships plunged by 39 percent since reaching their 2018 peak in early August. Fourth-quarter hedging contracts dropped 11 percent from their high last month.

“Some of the weakness we have seen in dry bulk freight rates can to some extent be attributed to growing uncertainty around the trade war,” said Peter Sand, chief shipping analyst at BIMCO, a trade group representing 2,100 ship owners and operators. “It is an increasing worry that we hear amongst our members.”

Still Bullish

Some observers say freight costs offer investors clues about economic and trade growth. Increased purchases of iron ore feed China’s steel mills and ultimately power the country’s construction industry. Coal is predominantly used in power generation.